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Older Condos Better Than New?

MATURING NICELY 505 Greenwich Street in SoHo is five years old, and sales are stronger there than at some of its newer neighbors, brokers say.Credit
Michael Appleton for The New York Times

BUYERS who once would have headed straight for the sleek lines and polished finishes of new condominiums are discovering a different sector of the market: almost-new condos.

Buildings finished a few years ago appeal to these buyers, because they can offer a contemporary aesthetic without many of the risks that come with brand-new construction. Chances are good that a building well beyond infancy, and maybe even toddlerhood, has already overcome any growing pains. Banks also view established buildings more favorably, making mortgages easier to come by. On top of that, prices are often lower than for comparable new units.

“Almost-new development seems to be picking up steam, and I think it’s because it’s seen as an alternative for people who want new construction,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel and a partner in Condominium Recovery, which invests in real estate. “Almost-new has all the amenities that were widely touted during the boom, but they’re already established. All the kinks have been worked out, and there are no empty units to worry about.”

While new-development units accounted for 57 percent of all apartments sold in Manhattan at the height of the condo boom in 2006, they now account for only 16 percent of sales, said Mr. Miller, who also provides market data for Prudential Douglas Elliman. But almost-new condos, which he defines as units three to five years old, have picked up some of the slack, with 10 percent of the market, versus less than 2 percent in 2007. Those figures reflect changes in inventory, he said, but still show a significant shift in buyers’ preferences.

“We looked at one new development where the person showing us around said move-in was supposed to be in May,” said Ms. Saitowitz, who works in financial sales. “But we were standing in units with no walls, and you couldn’t even tell where the bathrooms would go.”

She and her husband were much more comfortable buying a resale in a three-year-old building. “It meant that the building had been lived in,” she said, “and if there was anything wrong, it had been dealt with already.”

Mr. Miller noted that prices in new developments tend to be higher than in almost-new buildings, because unlike most resales, they “haven’t adjusted to the current pricing conditions.” That’s because the developers’ banks have not allowed them to lower their prices, he said.

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Youngish buildings like One Beacon Court are holding their value.
Credit
Marilynn K. Yee/The New York Times

Doug Newkirk, an agent with Core, listed a $1.295 million one-bedroom at 505 Greenwich Street in SoHo that recently went into contract after three weeks on the market. “The advantage of a modern building like this one that was built mid-decade,” Mr. Newkirk said, “is it’s still in incredible condition and its tax abatement hasn’t run out yet.”

Mallory Weil, a senior vice president of Halstead Property who has a listing at 505 Greenwich and also lives there, said the building was less expensive than some of its neighbors.

“We were the first condo to go up five years ago” in the area, Ms. Weil said, “and because the market went up so quickly after that, later developers wound up paying a lot more for their land.” She said original owners were receiving an average of $1,200 a square foot, “which is quite reasonable for a building like this one.” Many units originally sold for under $1,000 a square foot.

Banks clamped down on lending for mortgages in new construction after the Lehman Brothers crisis in September 2008. Melissa Cohn, the president of Manhattan Mortgage, says major lenders now will not make loans in a new building unless 70 percent of its apartments have closed. Another potential snag is a newly enforced requirement that buildings have at least 10 percent of their annual budget in a reserve fund. “Brand-new buildings tend not to have it,” she said, “and it usually takes a few years for a building to build that up.”

Buyers are also steering clear of new developments to avoid the possibility that the project will never get finished or not turn out as promised.

“There are so many disasters out there,” said Lawrence Rich, a vice president of Prudential Douglas Elliman. “Every day you hear of another new building that’s in trouble, and people don’t want a building where there might be problems and they won’t enjoy living there while it all gets worked out.”

Mr. Rich said he was working with a buyer who had started his search in new development two years ago but pulled back when the market seized up. “But now he doesn’t want a brand-new building,” Mr. Rich said. “He wants something that’s two to three years old, something that’s established but still considered new.”

The buyer, as well as more than a dozen others approached for this article, declined to be interviewed. He, like many of the others, works in finance, and is forbidden by his company to speak to reporters.

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505 Greenwich.Credit
Ruby Washington/The New York Times

Angela Latigona, an agent at Warburg Realty, has a buyer with a budget of about $6 million who, if all things were equal, would buy a penthouse he has his eye on in a new development.

But Ms. Latigona said he was now angling for a resale to avoid the transfer taxes that buyers in a new development typically must pay (the sellers pay them in a resale). He also would rather be in a building with a proven sales record.

“He knows that at his price point, if he buys in a new development, he’ll be carrying the building,” Ms. Latigona said. “And if nothing else sells, he’ll be in an unwarranted expensive apartment.”

Frances Katzen, an executive vice president of Prudential Douglas Elliman, says some buyers are avoiding new buildings even when developers pay closing costs and mansion taxes. “They feel the floor plans were better in 2004 and 2005, when there wasn’t such a boom and developers were taking their time,” she said.

Ms. Katzen has listings at 260 Park Avenue South, where prices are down slightly from the market’s peak. A two-bedroom she recently sold there for $2.625 million was first bought in early 2008 for $2.7 million. “This building seems to have rallied quite well,” she said.

Wilbur Gonzalez, an agent at Brown Harris Stevens, said interest was high for his listings at 40 Mercer Street in SoHo, the 2007 building where he lives. “People want to see an operating budget that’s been in effect for a few years and they don’t have to worry about maintenance going from $1 per square foot in the first year to $2 per square foot the second year, which is fairly common,” Mr. Gonzalez said.

Forty Mercer, however, has actually lowered its common charges, he said. But the building did have problems with its swimming pool, which he described as “a drawn-out mini-disaster.”

“We basically had to build a new pool,” he said, “and the whole time people couldn’t access the spa area. It’s a perfect example of how people who bought in the beginning had to go through some pain. But now it’s done.”

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The Park Imperial.Credit
Chester Higgins Jr./The New York Times

One of his sellers is looking for a larger space and would like to move into a new development. “But the buildings we were thinking of have been put on hold,” Mr. Gonzalez said. They are now looking at loft buildings converted as long as 10 years ago.

In some cases, people selling condos that they bought just three to four years ago are turning a tidy profit — an unusual outcome in the current market, where prices have fallen by as much as 30 percent from the market peak in early 2008.

Shaun Osher, the president of Core, which specialized in new development during the boom, said: “Some of the most appealing product is new development that was finished three to four years ago, and that’s a very finite market because there weren’t that many properties. That’s why certain buildings have held their value better than the rest of the market.”

Many of these value-holding buildings are high-end. Resales have been exceptionally strong in the Columbus Circle/Lincoln Square area, including 15 Central Park West, the Time Warner Center, and two lower-profile buildings, the Park Laurel on West 63rd Street and the Park Imperial on West 56th. Many of the resales in these buildings have price tags above $5 million.

Across the park, at One Beacon Court, the condominium tower above Bloomberg headquarters on 58th Street near Third Avenue, apartments originally purchased for about $2,000 a square foot have been selling for as much as $4,000 a square foot, the same as at the market’s height.

Giampiero Rispo, the president of Domus Realty, which works exclusively with foreign buyers, has a penthouse listing at One Beacon Court that recently went into contract for $18.5 million. The owner paid $10.5 million for the four-bedroom apartment in 2005, when One Beacon Court opened.

Its residents — currently including the singer Beyoncé Knowles; formerly the baseball players Bobby Abreu and Johnny Damon — no doubt appreciate a feature not easily replicated in even the newest of the new: the circular driveway, which, Mr. Rispo said, “lets you get in and out of the building without being seen from the street.”

At some point, though, the sheen wears off any project. Michael Garr, a senior vice president of Core who has sold many apartments at the Chelsea Mercantile, a West 23rd Street condo conversion finished in 2000, said that although sales have been strong there, “design specs have changed since the building opened.”

And sellers are finding that, as in many resales, they have to update kitchens or baths to compete with new and almost-new construction. “Particularly in a market like this,” Mr. Garr said, “things have to look top-notch.”